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Q. On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profit and drawings, etc, were Rs.80,000, Rs.60,000 and Rs.40,000 respectively . Subsequently, it was discovered that the interest on capital and drawings has been omitted.

    (a) The profit the year ended 31st March, 2014 was Rs.80,000.

    (b) During the year Saroj and Mahinder each withdrew a sum of Rs. 24,000 in equal instalments in the end of each month and Umar withdrew Rs. 36,000
 

Dear Student,
 

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Saroj’s Capital A/c

Dr.

 

2,350

 

 

Mahinder’s Capital A/c

Dr.

 

1,300

 

 

 To Umar’s Capital A/c

 

 

 

3,650

 

(Profits wrongly distributed without providing interest on capital and drawings, now adjusted)

 

 

 

Working Notes:

WN1: Calculation of Opening Capital

Particulars

Saroj

Mahinder

Umar

Closing Capital

80,000

60,000

40,000

  Add: Drawings

24,000

24,000

36,000

  Less: Profits (80,000 in 4 : 3 : 1)

40,000

30,000

10,000

Opening Capital

64,000

54,000

66,000

 

WN2: Calculation of Interest on Capital

 

WN 3: Calculation of Interest on Drawings

 

 WN 4: Calculation of Profit Share to be credited

 Profit available for distribution among partners = 80,000 – 18,400 + 2,000 = Rs 63,600

WN5: Statement showing adjustment

Statement Showing Adjustment

Particulars

Saroj

Mahinder

Umar

Total

Interest on Capital                       

6,400

5,400

6,600

18,400

Interest on Drawings                 

(550)

(550)

(900)

(2,000)

Profits to be distributed             

31,800

23,850

7,950

63,600

Total (A)

37,650

28,700

13,650

80,000

  Less: Profits wrongly distributed (B)

40,000

30,000

10,000

80,000

Net Effect (A – B)

(2,350)
Dr.

(1,300)

Dr.

3,650

Cr.

NIL

 

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